Case Number: BC506635 Hearing Date: May 15, 2014 Dept: 58

JUDGE ROLF M. TREU
DEPARTMENT 58
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Hearing Date: Thursday, May 15, 2014
Calendar No: 11
Case Name: Amatokwu, et al. v. Wells Fargo Bank, N.A., et al.
Case No.: BC506635
Motion: Demurrer and Motion to Strike
Moving Party: Defendant Wells Fargo Bank, N.A.
Responding Party: Plaintiffs Buashie N. Amatokwu and A-Selah LLC
Notice: OK

Tentative Ruling: Demurrer is sustained without leave to amend. Motion to strike is moot.
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Background –
On 4/22/13, Plaintiffs Buashie N. Amatokwu and A-Selah LLC filed this action against Defendants Wells Fargo Bank, N.A. and NBS Default Services, LLC arising out of the loan origination, loan servicing, and foreclosure of real property. In response but prior to the hearing on a demurrer and motion to strike filed by Wells Fargo, Plaintiffs filed a First Amended Complaint on 7/11/13. On 9/26/13, the Court sustained Wells Fargo’s demurrer to the FAC with leave to amend. On 10/25/13, Plaintiffs filed a Second Amended Complaint.

Factual Allegations of the SAC –
In March 2010, Amatokwu began a loan process with a broker (referred to as “Agent” and identified as Tracy Cavanaugh (¶ 129)) to purchase the property (¶ 22) and signed loan documents that had a higher interest rate (6.001% as opposed to 5% (¶ 51 (g))) than discussed after the Agent stated she would fix the rate (¶¶ 23-24). In mid-2011, Amatokwu began contacting Wells Fargo to obtain a loan modification applying but being denied three times; Wells Fargo offered a forbearance, however Amatokwu did not accept because she wanted Wells Fargo to look into whether the original appraisal was properly calculated; Wells Fargo rescinded the forbearance offer. ¶¶ 28-29. On 3/21/12, Wells Fargo recorded a notice of default without contacting Amatokwu to discuss possible alternative solutions. ¶¶ 31-33. On 7/24/12, Wells Fargo recorded a notice of trustee’s sale. ¶ 34. On 12/14/12, Amatokwu transferred interest in the property to A-Selah LLC. ¶ 4.

Plaintiffs assert causes of action for (1) violation of Civil Code § 2923.5; (2) violation of Bus. & Prof. Code § 17200 (loan origination); (3) violation of Bus. & Prof. Code § 17200 (loan servicing); (4) violation of Bus. & Prof. Code § 17200 (foreclosure); (5) fraud (loan origination); (6) breach of the implied covenant of good faith and fair dealing; (7) cancellation of void contract and restitution; (8) quiet title; and (9) declaratory relief.

Request for Judicial Notice –
In connection with the demurrer and motion to strike, Wells Fargo requests judicial notice of the recorded deed of trust, corporate assignment of deed of trust, substitution of trustee, notice of default, and notices of trustee’s sale for the property. Wells Fargo also requests judicial notice of the recorded grant deed in favor of A-Selah LLC, the bankruptcy docket of A-Selah LLC’s bankruptcy, and the Court’s 9/26/13 ruling. The RJN is granted.

Demurrer –

1. 1st COA, Violation of Civil Code § 2923.5
Wells Fargo demurs to the 1st COA on the ground that Plaintiffs have alleged that Wells Fargo has satisfied the contact requirements of Civil Code § 2923.5 by considering Plaintiff’s loan modification applications (see Davenport v. Litton Loan Servicing, LP (N.D. Cal. 2010) 725 F.Supp.2d 862, 877). Wells Fargo also argues that Plaintiffs fail to allege facts as to how they were prejudiced by not having been presented other options. See Coburn v. Bank of New York Mellon, N.A. (E.D. Cal. 2011) 2011 WL 1103470 *6. The Court previously sustained the demurrer on these grounds.

Plaintiffs allege that they have been prejudiced because Wells Fargo rescinded the forbearance offer and did not offer any other foreclosure avoidance assistance. SAC ¶ 45. However, as alleged, Amatokwu contacted Wells Fargo beginning in mid-2011 to inquire about a loan modification, applying three times and being offered a forbearance. SAC ¶ 28; see also SAC ¶ 32 (alleging that Amatokwu initiated contact to discuss the status of the loan, property, and possible alternative solutions outside foreclosure). Applying Davenport, these factual allegations support Wells Fargo having explored options to avoid foreclosure (see Mabry v. Superior Court (2010) 185 Cal.App.4th 208, 232). These factual allegations negate Plaintiffs’ claim of a violation of Civil Code § 2923.5 and assertion of prejudice. The demurrer is sustained as to the 1st COA.

2. 5th COA, Fraud (Loan Origination)
Wells Fargo demurs to the 5th COA on two grounds.

a. Successor Liability
First, Wells Fargo argues that Plaintiffs fail to allege any facts connecting Wells Fargo to the loan origination, noting that a corporation purchasing the assets of another corporation is insulated from the debts and liabilities of its predecessor (see, e.g., Monarch Bay II v. Professional Service Industries, Inc. (1999) 75 Cal.App.4th 1213, 1216). The Court previously sustained the demurrer on this ground.

Plaintiff alleges that the original lender was Plaza Home Mortgage, Inc. (SAC ¶ 5) and that Wells Fargo subsequently purchased the loan (see id. ¶¶ 15, 25). Plaintiffs argue that Wells Fargo is liable based on the successor liability theory of fraudulent purpose of escaping liability. See, e.g., Ray v. Alad Corp. (1977) 19 Cal.3d 22, 28. However, Wells Fargo notes the general rule that successor liability is not extended to tort claims. See Franklin v. USX Corp. (2001) 87 Cal.App.4th 615, 627-28. Additionally, Plaintiffs only allege that the loan was purchased at below market values for the properties providing security. SAC ¶¶ 14-15, 25. This is insufficient to allege facts as to a fraudulent purpose, which is notable despite Plaintiffs’ allegation that the fraudulent purpose is supported by other similar incidences which have been confirmed by other courts (SAC ¶ 25). The demurrer is sustained as to the 5th COA on this ground.

b. Reliance
Second, Wells Fargo alleges that Plaintiffs fail to allege any facts to support reasonable reliance because it is unreasonable for Plaintiffs to have signed the loan documents without reviewing them first (SAC ¶¶ 23-24). See, e.g., 24 Hour Fitness, Inc. v. Superior Court (1998) 66 Cal.App.4th 1199, 1215. However, Plaintiffs allege that when Amatokwu signed the loan documents, she noticed that the interest rate was higher than what had been discussed and that the Agent told her she would fix it. SAC ¶¶ 23, 130. This is sufficient to support justifiable reliance at the pleading stage as to the different interest rates. However, the Court notes that Plaintiffs fail to allege facts to support justifiable reliance for all of Plaintiffs’ allegations (see SAC ¶ 131(a), (c) (concerning the right to cancel the loan and how late charges were calculated); ¶ 133 (concerning the appraisal of the subject property). See Perlas v. GMAC Mortg., LLC (2010) 187 Cal.App.4th 429, 436. Nevertheless, because Plaintiffs allege facts to support justifiable reliance at the pleading stage as to the different interest rates, the demurrer is not sustained on this ground. See Kong v. City of Hawaiian Gardens Redevelopment Agency (2002) 108 Cal.App.4th 1028, 1047 (stating that a demurrer cannot be directed to part of a cause of action).

3. 6th COA, Breach of Covenant of Good Faith and Fair Dealing
Wells Fargo argues that the implied covenant cannot exceed the scope of the contract (Agosta v. Astor (2004) 120 Cal.App.4th 596, 607), that Plaintiffs have no standing to enforce HAMP (see, e.g., Marks v. Bank of America, N.A. (D.Ariz. 2010) 2010 WL 2572988 *6) and the deed of trust includes no provision concerning a loan modification (RJN Ex. 1). The Court previously sustained the demurrer on this ground.

The 6th COA asserts that Wells Fargo is a party to a “certain National Class Action Settlement Agreement” which requires Wells Fargo to follow certain guidelines by offering loan modification reviews. SAC ¶ 26; see also id. ¶¶ 72-75 (referring to a “Commitment to Purchase Financial Instrument and Service Participation Agreement”). Plaintiffs rely on Marques v. Wells Fargo Home Mortg., Inc. (S.D. Cal. 2010) 2010 WL 3212131 *4-6, which stated that eligible HAMP borrowers had standing as third party beneficiaries under such an Agreement. However, Marques has been recognized as a clear minority opinion and as dicta. See Graybill v. Wells Fargo Bank, N.A. (N.D. Cal. 2013) 2013 WL 978245 *12 n.4. Because the allegations reveal that Plaintiffs are attempting to enforce HAMP (see SAC ¶ 148), the Court finds the weight of federal authority on this issue persuasive. The demurrer is sustained as to the 6th COA.

4. 7th COA, Reformation
The 7th COA asserts that the interest rate is unconscionable and was procured through fraud (SAC ¶¶ 157, 160). The Court previously sustained the demurrer on the ground that the 7th COA was dependent on the fraud allegations and that Plaintiffs failed to allege any facts that the interest rate is substantively unconscionable (Civil Code § 1670.5). As discussed above, the SAC continues to be deficient on these grounds. The demurrer is sustained as to the 7th COA.

5. 8th COA, Quiet Title
Wells Fargo demurs to the 8th COA on the ground that Plaintiffs fail to allege credible tender of the amount of the secured debt to quiet title. See Abdallah v. United Savings Bank (1996) 43 Cal.App.4th 1101, 1109; Stebley v. Litton Loan Servicing, LLP (2011) 202 Cal.App.4th 522, 526 (requiring that a full tender must be made). The Court previously sustained the demurrer on this ground.

Plaintiff fails to allege an exception to the tender rule. See Lona v. Citibank, N.A. (2011) 202 Cal.App.4th 89, 112-13. To the extent Plaintiffs rely on the fraud allegations (SAC ¶ 168), Plaintiffs’ fraud claims are deficient as stated above. To the extent Plaintiffs argue that tender is not required because Plaintiffs seek reformation and not rescission (SAC ¶ 166), this is inconsistent with the allegations of the quiet title claim (id. ¶¶ 168-170). The demurrer is sustained as to the 8th COA.

6. Dependent Claims
Plaintiffs’ 2nd through 4th COAs for violation of Bus. & Prof. Code § 17200 rely on Plaintiffs’ claims arising out of the loan origination (SAC ¶ 51), the failure to properly review Plaintiffs’ loan modification applications (see, e.g., SAC ¶¶ 93-97), and violation of Civil Code § 2923.5 (SAC ¶ 119). Plaintiffs’ 9th COA for declaratory relief is dependent on Plaintiffs’ other claims. SAC ¶ 176. These claims are deficient for the reasons stated above and are sustained for the same reasons.

7. Leave to Amend
Plaintiffs have requested leave to amend. The Court declines to grant leave to amend because Plaintiff has now had three opportunities to state causes of action, the nature of Plaintiffs’ claims is clear and Plaintiffs continues to fail to allege facts to establish liability against Wells Fargo. See Lawrence v. Bank of America (1985) 163 Cal.App.3d 431, 436.

8. Ruling
The demurrer is sustained without leave to amend. In light of the ruling on the demurrer, the motion to strike is moot.